Page 303 - Cambridge IGCSE Business Studies

24: Government economic objectives and policies

ACTIVITY 24.1

Below is a newspaper article published in a national newspaper of Country X.

Country X’s economy remains in recession
Country X’s economy has been in recession since late 2008 and is unlikely
to return to growth before 2014. The unemployment rate has hit an all-time

high of 27%.
Although infl ation has remained steady, GDP growth rate has massively

declined.
The government has tried to encourage growth and investment by keeping
interest rates at 0.5%. It has put together a committee of economic and
fi nancial experts to recommend further measures to improve economic

growth.

1 Make a list of the economic indicators that reflect the state of the economy of Country X.
2 What measures has the government of Country X taken to help the economy?
3 What is the main economic objective of Country X?
4 What problems might businesses in Country X face in a recession?
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The business cycle
The economy of a country is unlikely to grow by the same amount over a period of

time. The change in the economic activity as the economy grows and shrinks over

a number of years is known as the business cycle. It plays a vital role in shaping the
economic policies of the government.
The business cycle has four main stages. Each stage may last for months or even

years. The stages, as shown in Figure 24.2, are:

■ growth
■ boom
■ recession
■ slump.